Ongoing monitoring – being one step ahead

More and more companies are hitting the headlines for compliance failures, and many of these failures involve third parties engaging in corrupt business practices on behalf of the companies. While many companies have adopted a due diligence programme to collect information to ensure their business partners meet integrity standards, few have started actively monitoring their third parties.

An important due diligence tool for compliance officers to prevent compliance failures is on going due diligence. Constant monitoring will help ensure that business partners act with integrity at all times and will allow for a timely response as and when integrity issues arise.

Where does ongoing Monitoring stand?

With on-going due diligence you are a step ahead of new risks that may surface while conducting business with third parties, as third party–related risks are monitored and identified in real time throughout the entire life of a relationship. Due diligence monitoring focuses on a range of compliance challenges, litigation records, reputational media screening, significant corporate registry changes and business intelligence findings.

Be alert

With on-going monitoring, you receive real-time customised notifications when a red flag arises regarding the integrity of a third party. These red flags may come up via
searches of:

Sanctions lists

Watchlists, blacklists, denied-parties lists and most-wanted lists

Politically-exposed-persons lists

State-owned lists

ComplianceChallenged® (The Red Flag Group proprietary list built from media research and over 10 years of due diligence research, covering up to 23 risk areas)

Such notifications highlight high and relevant risks, rather than bombard the client with less significant information in the form of a data dump, which could overwhelm compliance and business teams. Intelligent filters, analyses, advice and counsel are provided in real time in any market, in any country, and in any language.

On-going monitoring also reveals third parties’ involvement in legal disputes, facilitating a proactive approach for managing and foreseeing reputational failures. Compliance officers save time and effort by analysing the reputational profile of the subject company through continuous English and local-language online media and database monitoring, as well as through on-the- ground business intelligence.

On-going due diligence ensures that compliance officers are made aware of any changes in their business partners’ risk and compliance status, and extends the life of one-time due diligence reports. It saves time and effort, enhancing customised advice while relevant information is flagged.

The following are some examples of when on-going monitoring is an efficient tool to keep ahead of compliance failures:

• A client is running a standard third party due diligence programme. An initial report is completed containing no negative news affecting the business partner’s integrity; however, allegations of corruption involving a director surface in the national press a few days after the report has been delivered. Using a standard due diligence renewal process this information would not have come up until two years later, meaning that the client would have been exposed to considerable risks in that two-year period. On-going monitoring, on the other hand, would allow the client to follow how the corruption allegations evolve and take immediate action when and where needed.

• A due diligence case details the corporate-registry records of a third party and finds no concern in terms of integrity; however, the third party’s ownership structure changes a few weeks after the delivery of the report. The new shareholding structure ultimately links the business partner to a sanctioned entity, which would not have been uncovered until a new due diligence report was conducted when the contract was up for renewal two years later. With on-going monitoring, the client would be alerted straight away.

• Preliminary proceedings related to an intellectual property legal dispute involving a subject company are revealed through initial litigation checks. With a standard due diligence report, this is the only information that would have been obtained. On-going monitoring, however, would enable an update as soon as the court’s final decision was made publicly available.